McEntire Corporation began operations on January 1, 2009. During its first 3 years of operations, McEntire reported net income and declared dividends as follows.
Net income Dividends declared
- 2009 $40,000 $ -0-
- 2010 125,000 50,000
- 2011 160,000 50,000
The following information relates to 2012.
- Income before income tax $220,000
- Prior period adjustment: understatement of 2010 depreciation expense (before taxes) $25,000
- Cumulative decrease in income from change in inventory methods (before taxes) $45,000
- Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2013) $100,000
- Effective tax rate 40%
(a) Prepare a 2012 retained earnings statement for McEntire Corporation. (Enter all amounts as positive amounts and subtract where necessary.)
(b) Assume McEntire Corp. restricted retained earnings in the amount of $70,000 on December 31, 2010. After this action, what would McEntire report as total retained earnings in its December 31, 2010, balance sheet?